Nick Clegg: Raising income tax threshold is key Budget priority

The Deputy Prime Minister will tell business leaders that Liberal Democrats
want to keep cutting income tax for ordinary taxpayer, not the richest

Mr Gove accused Nick Clegg, the Lib Dem leader, of being conflicted over education policy, both supporting reforms and pandering to party activists who oppose themPhoto: REUTERS

6:01AM GMT 10 Feb 2014

The starting threshold for income tax could rise above £10,000 at the Budget next month, Nick Clegg will suggest today.

The Deputy Prime Minister will say that a higher threshold will be the Liberal Democrats' top priority for the Budget.

In speech to business leaders today Mr Clegg will say that his party “want to keep cutting income tax for ordinary taxpayer."

He will say: “That will be the main item Danny and I push for in the Budget – again. In the next parliament we would raise the personal allowance so that no one pays any income tax on the first £12,500 they earn.

“It’s our flagship policy because it’s how we make work pay, and it's our way of making sure the British people know that this recovery is theirs.

The personal allowance – the threshold at which people begin to pay any income tax on their earnings- has been raised in steps from £6,475 and will reach £10,000 in April next year.

The gradual process is worth a total of £700 a year to around 20 million workers, Mr Clegg has said.

Mr Clegg has been pressing Osborne to increase the threshold to £10,500 in his budget, announced on March 19, from 2015 - a move that would cost the Treasury £1bn. However Mr Clegg actually favours an even higher level of £10,700.

The basic rate of income tax is 20% so an extra £500 on the personal allowance would cut tax by £100 for anyone earning £10,500 or more.

Raising the threshold to £10,000 was central to the Liberal Democrats' election manifesto in 2010 and was identified as a Government tax priority in the coalition agreement.

Mr Clegg has said previously that it is his "long-term ambition" is to "make sure no one pays any income tax on the equivalent of the minimum wage, which is around £12,500".

Last month the Prime Minister said that any money the Government had “in the coffers” would be used to target tax reductions on the poorest hinting that a further increase to the personal allowance could be possible in the next budget.

He has since repeatedly refused to rule out lowering the rate of tax paid by the richest further from 45 per cent to 40 per cent.

Mr Clegg’s speech comes as senior figures from the Liberal Democrats and Conservatives become increasingly critical of their coalition partners in the run up to next year’s election.

Speaking on BBC One’s Sunday Politics the Liberal Democrat Peer Lord Oakeshot welcomed his party’s “enemy within strategy." Lord Oakeshott said that the coalition as "running out of steam" and that key figures in the Liberal Democrat leadership were increasingly "attacking" the Conservatives.

Bernard Jenkin, the Conservative MP and chairman of the Commons Public Administration Committee, said that rows in the Coalition meant there was a stronger case for the coalition to split at least six months befoer the general election.